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NOVANEWS

Cuts to food stamps and jobless benefits predictable result of ‘neoliberal assault’ on American people

- Jacob Chamberlain

(Photo via Flickr / tr.robinson / Creative Commons License)As Congress decides this week whether to re-institute emergency jobless benefits for millions of Americans and closes in on negotiations for a Farm Bill that could see billions of dollars cut out of food stamp programs, renowned activist and intellectual Noam Chomsky summed up the state of American politics in an interview Thursday in two words: “pure savagery.”

“The refusal to provide very minimal living standards to people who are caught in this monstrosity — that’s just pure savagery.” –Noam Chomsky

TheWashington Post reportsthat current Farm Bill negotiations are calling for the elimination of roughly $9 billion in funding for food stamps through the Supplemental Nutrition Assistance Program (SNAP) over the next decade, “according to several aides familiar with the negotiations who are not authorized to speak publicly about the details.”

The changes would decrease assistance for at least 800,000 households, with cuts of up to $90 per month. “That’s the last week of groceries for the month,” Sen. Kirsten Gillibrand (D-N.Y.) told the Washington Post.

The GOP-controlled House had originally called for $40 billion in cuts and the Democratic-led Senate had originally called for $4 billion.

The negotiation, expected to wrap up by next week, arrives two months after U.S. lawmakers allowed a separate stimulus boost to SNAP to expire, cutting a universal $5 billion in funding that gouged food assistance for 47 million food stamp recipients, 49 percent of whom are children.

Meanwhile, last month Congress let expire emergency long-term jobless benefits for 1.3 million Americans, a “lifeline” for many who have been looking for jobs for an extended period of time and depended on those benefits to get by.

On Tuesday, the Senatejust barely passeda vote to move ahead on a bill that would restore those jobless benefits. But even if it the actual bill passes in the Senate, it will then head to the Republican-led House of Representatives, where it is likely to face strong opposition.

“Inequality has been a very serious problem for a very long time,” Chomsky said. “Inequality now is at a level not seen at least since the 1920s…maybe further back. That is very severe.”

Any growth in the last recent years has gone to the top 2% of the population, Chomsky said, adding that a large part of the population is now living below the poverty line while at the very top of the spectrum, profits are booming for the wealthy.

However, today’s congressional roadblocks to public service programs, that many say are essential for those in need in the United States, have “nothing to do with bad apples in Congress,” Chomsky told HuffPost Live. “These are deep structural problems having to do with, in effect, the neoliberal assault on the population, not just of the United States but of the world, that’s taken place in the past generation. There are areas that have escaped, but it’s pretty broad.”

Chomsky added:

It used to be said years ago that the United States is a one-party state — the business party — with two factions, Democrats and Republicans. That’s no longer true. It’s still a one-party state — the business party — but now it has only one faction. And it’s not Democrats, it’s moderate Republicans. The so-called New Democrats, who are the dominant force in the Democratic Party, are pretty much what used to be moderate Republicans a couple of decades ago. And the rest of the Republican Party has just drifted off the spectrum.

by ROSEMARY LÉVY ZUMWALT

In his memoir, Challenging the Mississippi Firebombers, Memories of Mississippi 1964-65, Jim Dann put to paper the stories from his time in Mississippi 50 years ago, working as a young college student for fifteen months in Sunflower County to establish Freedom Schools and to help register African-Americans to vote. Folklorists will recognize in this account what Frank deCaro refers to as “our life memory . . . informed by and greatly influenced by the oral stories that we tell . . . about our lives” and “the social importance” and “considerable power” of life memory and oral stories (2013:ix).

Jim Dann did not initially think of these narratives as worthy of the printed page. Simply accounts of his own life, he recalls that his children were “his first audience”: “. . . they listened to these stories in the car and on vacations. I was just trying to keep them from being bored till we got to our destination, but they genuinely looked forward to the next ‘chapter’ and years later asked me to write them down” (233). Dann did not live to see the book published, though just before his death he saw the page proofs (Publisher’s Note).

Memory, Webster’s Dictionary reminds us, “applies both to the power of remembering and to what is remembered.” There is, indeed, power in this book – power and struggle and heroism. There is the day-to-day heroism of the African-American residents of Ruleville, Drew and Indianola, of the pastors of the Black churches and the teachers in the segregated schools. Woven into these stories is the heart and soul of community struggle for respect and human rights, a struggle that depended on the common folk standing up for their rights in the face of the entrenched and vicious white power structure.

We know some of these stories, e.g., the brutal murders of the young Civil Rights works, Andrew Goodman, James Chaney and Michael Schwerner in Meridian, Mississippi (45-46); the impassioned testimony of Fannie Lou Hamer before the Democratic Party Credential’s Committee; and the attempt for recognition at the 1964 Democratic Convention of the Mississippi Freedom Democratic Party (114-19).

However, with more intimate detail, Jim Dann – to be nicknamed, “Jim Dandy,” by the young people with whom he worked in Mississippi – takes us into his dorm room at the training center in Oxford, Ohio, when James Foreman as an organizer with the Congress of Racial Equality (CORE) asked if he would go to Meridian. “I said I would be happy to but I had already promised that I would go to Ruleville” (45). Foreman turned to Dunn’s

roommate, Andrew Goodman, and asked him to go. Goodman readily agreed. “We liked each other, and I was a bit disappointed and a bit envious when he told me before the end of the training that he had to leave early with [James] Chaney. There was some kind of emergency and the CORE leader at Meridian, Michael Schwerner, decided that the three of them should skip the final days of training and return to Meridian” (45).

By the end of the training session, when the young freedom workers were boarding the bus for Mississippi, rumors were circulating that three volunteers were missing; their bodies would be found over a month later, cast into a muddy dam near the site of the murder (109). The grim reality of the triumvirate – torture, lynching and the hateful grip of the Ku Klux Klan – awaited these young people at the end of the journey for their volunteer work in Mississippi. Dann recalls,

Everyone’s fear and nervousness evaporated under the warm and sunny greeting we received from Fannie Lou Hamer. We had stopped in front of her house, and she came bounding out . . . shouting her greetings before we could collect our luggage from the bus driver, who was as eager to leave as Hamer was to have us here. (49-50)

As William A. Wilson notes in “Personal Narratives,” stories are crafted “from carefully selected details from the worlds of their authors” (Wilson 2006:268). Wilson quotes Neil Postman, who writes in the Atlantic Monthly, that stories give meaning to our existence, “‘Without air, our cells die. Without a story our selves die’” (Postman in Wilson 2006:68). The cautionary stories recounted in Challenging the Mississippi Firebombers did indeed contain wisdom for staying alive. Behind each axiom for security was a story,

* Never tell anyone where we are going or where we had been . . . .

* Don’t even tell people when we leave. Disconnect the interior dome lights so we can’t be seen when entering and exiting a car. (That was how Medgar Evers had been killed.)

* Never let a car pass you on the highway no matter how fast you have to drive. (. . . Jimmy Travis had been shot in that fashion). (64, parenthetical comments in original)

Dann recollected, “I sometimes had to drive one hundred miles per hour to avoid being passed, but nobody ever passed our car when I was driving. . . . One time, however, I lost control and ended in a ditch, but I managed to drive out without a car passing us” (64). In a harrowing account, Dann tells of driving out to “the tiny hamlet of Tippo,” on a single-lane dirt road, bordered on both sides by cotton fields (149).

There was not another vehicle on that road. In about five miles we passed a road grader off the dirt road parked in the field with a white driver who watched us. Something about that did not seem right to us so John [Harris] started fiddling with our two-way radio in the SNCC [Student Nonviolent Coordinating Committee] car, just randomly moving the tuner dial, while I drove. After a minute or two of just static we heard the following conversation: ‘Where are they?’ ‘About ten miles from Tippo. There’s a nigger and a nigger-lover.’ ‘What’s the car look like?’ ‘It is a white Plymouth.’ ‘Well, by the time it gets to Tippo it will be red with their blood.’ I looked at John and he looked at me and without missing a second I wheeled the car around and at top speed raced back down the dirt road. (150)

Jim Dann’s account takes the reader through the momentous enactment of the Voter’s Rights Act and President Lyndon B. Johnson’s War on Poverty with the initiation of the Head Start Program. He reflects, “No doubt voter registration, desegregation and Freedom Schools had a long-range revolutionary aspect, but of all the things I was involved with, Head Start provided the most immediately palpable results in bettering the condition of the people then and there” (188).

Dann left Mississippi to return to UCLA for the fall semester in 1965 (200). He would go back to Mississippi in June 2000 for a reunion of those who had worked together in 1964-65, and who had embraced the SNCC anthem adapted from a song popular in 1964, “Keep on Pushing,” and changed by Fannie Lou Hammer to “Keep on keeping on” (157). Jim Dann, John Harris and Karen Koonan drove together from the Memphis airport, passed Winona, Mississippi, where Fannie Lou Hamer “had been savagely beaten thirty-years earlier” (204), and arrived at the Holiday Inn in Indianola.

Black hotel clerks kindly greeted us in a place they never would have been allowed inside in 1965. We got directions to the B. B. King concert that was to be in a park near Main Street, not far from the Indianola jail. . . . The crowd was totally integrated and white sat next to black, both cheering King and his music. I would encounter many other changes in the weekend, but this integrated crowd, who loved B. B. King so much, was the biggest surprise of the reunion. My mind went back to his concerts at the all-black Club Ebony where he bought us chicken dinners. (205)

The next day they visited the jail in Drew, where Dann and others had been repeatedly incarcerated for civil disobedience and simply as the result of police harassment. In 2000, it was “dilapidated and overgrown with weeds.” In Ruleville, “the new black mayor” greeted them, and they visited the memorial gravesite of Fannie Lou Hamer (205).

Jim Dann does not present himself as a hero, or even as having been courageous. Rather he portrays himself as a young person who was committed to working with others, some of those who were whites and blacks from other parts of the United States, who would spend some months in Mississippi trying to bring about change; and others who were African-Americans living a life steeped in the oppression of the segregated South. It is indeed in the lived lives of the ordinary people, recounted in this memoir, who lived out the lyrics of “Keep on Keeping on,” who were heroes of monumental everyday courage. Jim Dann has enriched us all by chronicling his memories in Challenging the Mississippi Firebombers: Memoirs of Mississippi 1964-65.

Rosemary Lévy Zumwalt is Dean of the College Emerita and Professor Emerita of Anthropology at Agnes Scott College in Decatur, Georgia, USA. Her most recent publication is Franz Boas and W. E. B. Du Bois at Atlanta University, 1906 (2008) for which she received the John Frederick Lewis Award from the American Philosophical Society. She can be reached at rosemarylevyzumwalt@gmail.com.

NOVANEWS

A Half Million Dead Iraqis

by WINSLOW T. WHEELER

Today’s fixation in Washington is former Secretary of Defense Robert Gates’ so called new revelation, breathlessly reported by theWashington Post(Robert Woodward), the New York Times (Thom Shanker)and others, that Barak Obama was not fully committed to George Bush’s (and Robert Gates’) war in Afghanistan, especially the troop surge there which Obama allowed himself to be maneuvered into by the Pentagon’s generals (and Robert Gates). We are then blown away-well, not entirely–by the other dramatic news from Gates that Hilary Clinton said politics influenced her own position during her 2007-8 presidential campaign on the other troop surge-the one in Iraq. Quite a stunner, eh?

Without giving this fluff any further attention, it’s time to consider something a little more important and a little less comforting to those seeking to distract us from the effects of their handiwork.

Consider the question of life and death. Specifically, almost a half a million deaths, mostly of civilians. That is the tally in Iraq directly attributable to the US invasion and occupation of Iraq: “461,000, just under half a million people,” a recent study says. It came out in October 2013. (I had cast it into my to-read pile; I finally got to it; I urge you to read it-more promptly than I did.)

In sum, the study surveyed 2,000 randomly selected households throughout Iraq, using methods to ensure the sample was nationally representative-including of those who were either internally or externally displaced. Direct interviews were the primary data collection technique–with procedures to verify what the interviewers were being told.

As to findings-

* “The wartime crude death rate in Iraq was 4.55 per 1,000 PY (95% UI 3.74-5.27), more than 0.5 times higher than the 2.89 ((95% UI 1.56-4.04) death rate during the 26-mo period preceding the war. By multiplying those rates by the annual Iraq population, we estimate total excess Iraqi deaths attributable to the war through mid-2011 as about 405,000 (95% UI 48,000-751,000).” (page 7)

* “Conservatively, assuming that only 15% of the emigrant households experienced a death, our migration adjustment would add more than 55,000 deaths to the total generated by our household survey..” (page 9)

* “Our total excess death estimate for the wartime period, then, is 461,000, just under half a million people.”(page 10)

* “US-led coalition forces were reported to be responsible for the largest proportion of war-related violent deaths (35%), followed by militia (32%). While militia were reportedly responsible for the most adult male deaths in the sibling survey, coalition forces were reportedly responsible for killing the most women.” (Page 6)

Americans should not take solace from the finding that 65 percent of the war-related violent deaths were from non-Americans. It is not just that women were victimized by us (or rather our coalition) more than by others, but also consider that America initiated the social and political forces that resulted in all of the half million deaths-a tally that Saddam Hussein at his worst would have envied and that would put him in a category of mass murderers second only to Hitler, Stalin and Pol Pot.

It is also highly likely that the 460,000 deaths are an undercount. The baseline death rate was the 26 month period just before the US invasion in March 2001; that was a death rate already elevated by the effects on the Iraqi infrastructure from the bombing of civilian targets (such as water treatment facilities and electricity generation) during Operation Desert Storm in 1991 and also elevated by years of US-led economic sanctions. Moreover, it is not clear if the new study included infant mortality in its accounting, and its assertion that only 15 percent of the families that left Iraq during the US occupation had a death in the family seems more than a little conservative for that group.

Perhaps the upper bounds of the statistical analysis (751,000 deaths, or more if you include the emigrant households) approach the reality of the impact of the American invasion and occupation.

No wonder they kicked us out in 2011 and don’t want us back now.

For it all, we have many people to thank, not just Robert Gates. Anyone reading this commentary knows their names. However, as you contemplate Gates’ efforts to write his own legacy, think about what he was a part of-but which his eagerly fawning reviewers write no whisper of.

(For an antidote to the press characterization of Gates as the best secretary of defense since the title was created, consider some different views here, here, hereand here.)

NOVANEWS

Caveat Emptor

by MELVIN A. GOODMAN

Unlike the New York Times and the Washington Post, which received room service on the delivery of the controversial memoir of Secretary of Defense Robert M. Gates, I will have to wait for Amazon to deliver my copy next week. In the meantime, since I have know Bob Gates for nearly fifty years, working with him for more than a decade; working for him for five years; and testifying against him before the Senate intelligence committee in 1991, I believe that I have some warnings about the author as well as the leading lights of the mainstream media, such as David Brooks of the Times and Walter Pincus of the Post, who believe that Gates made major contributions to the national security policy of the United States. Nothing could be further from the truth.

There are several things that need to be understood regarding Gates’ career at the Central Intelligence Agency, the National Security Council, and the Department of Defense. First of all, Gates has been a sycophant in all of his leadership positions, catering to the policy interests of Zbigniew Brzezinski and Brent Scowcraft at the NSC; William Casey at the CIA; and the Joint Chiefs of Staff at the Pentagon. Gates catered to the right-wing ideology of Bill Casey in the 1980s, playing a major role in the politicization of intelligence and dangerously crossing the line of policy advocacy in private memoranda to the CIA director. For the most part, Gates has been a windsock when it came to policy decisions and typically supported his masters.

Second, Gates has never demonstrated the integrity that his important positions have demanded. As a result, when he was nominated by President Ronald Reagan to be CIA director, Senate intelligence committee chairman David Boren (D/OK) told him that the committee did not believe his denials of knowledge of Iran-Contra. Before Gates.

removed his name from the nomination process, there was considerable laughter in the hearing room when Gates referred to Casey as a model CIA director and stated that he would have resigned from the CIA if had known about the “off-the-shelf” capability to run the Iran-Contra operation out of the NSC.

Gates was nominated a second time by President George H.W.Bush in 1991 and attracted more negative votes from the Senate (thirty-one) that all directors of central intelligence in the history of the CIA. I testified against his confirmation at that time, and I lobbied against his appointment as Secretary of Defense in 2006 to replace Donald Rumsfeld. The day after the committee approved Gates’s appointment, the Post’s legendary cartoonist, Herblock, pictured the CIA headquarters building with a big banner proclaiming, “Now under old management.” I encountered many key Senate staffers who opposed the appointment of Gates, but believed that it was important to abort the stewardship of Rumsfeld. At that time, I labeled Gates the “morning after” pill.

Third, it is astounding that Gates, a senior CIA Kremlinologist could be so wrong about the central issues of the day and yet make it to the top of the intelligence ladder. For example, Who was Gorbachev? Was he serious? Would he make a difference? Was he serious about detente and arms control? As late as 1989, Gates told various congressional committees that a “long, competitive struggle with the Soviet Union still lies before us” and that the “dictatorship of the Communist Party remains untouched and untouchable.”

In many ways, the most stunning aspect of Gates’s national security stewardship was his reappointment at the Defense Department by President Barack Obama in 2009. Indeed the appointment of Hillary Clinton and the reappointment of Bob Gates were cynical gestures, naming Clinton to keep the “Clinton Foundation” (Bill and Hillary) inside the White House tent pissing out instead of outside the tent pissing in. Gates was left in place so that the president could signal to the uniformed military that there would be no significant changes at the Pentagon. Gates’s Cold War ideology and his politicization of intelligence were completely forgotten.

By the time that Gates’s decided to retire in 2011, President Obama was no longer following the secretary of defense’s advice on Afghanistan; the raid against Osama bin Laden; the handling of the insubordination of General Stanley McChrystal; and Gates’s heel-dragging on ending the cynical policy of “don’t ask, don’t tell.” Gates decided to retire because he would not support a smaller military that would do fewer things and go to fewer places, but that is exactly what the president had finally endorsed.

President Obama would have saved himself a great deal of aggravation if he had consulted with former secretaries of state George Shultz and James Baker, whose memoirs record their difficulties with Gates’ attempts to weaken their policies and their diplomacy. Shultz charged Gates with “manipulating” him, and reminded Gates that his CIA was “usually wrong” about Moscow. Gates was wrong about the biggest intelligence issues of the Cold War and he made sure that the CIA was wrong as well.

NOVANEWS

A Palestinian man reads an Israeli order temporarily closing the studies center of Al-Quds University, in occupied Jerusalem’s Old City on 1 October 2013, to prevent a press conference by the Coalition for Jerusalem.

The following sign-on statement from Palestinian and other Arab-American scholars and writers comes in the wake of theAmerican Studies Association(ASA) vote to endorse the academic boycott of Israeli institutions, and the backlash against it by anti-Palestinian groups.

Statement of Support for the American Studies Association

We, the undersigned Palestinian and other Arab-American scholars and writers as well as Arab scholars in the United States affirm our strong solidarity with the American Studies Association’s position in favor of the boycott of Israeli academic institutions

We also condemn, in the strongest possible terms, the expressions of hate and intimidation to which ASA members are being subjected, tactics that are illegal or verge on illegality under US law.

We express our heartfelt gratitude to the ASA – and to all other academic associations including the Association for Asian American Studies and the Native American and Indigenous Studies Association (NAISA) – that have taken this principled and courageous stand despite the fierce backlash from organizations that support Israel’s atrocious and decades-old human rights record of military occupation and dispossession of the Palestinian people and their lands.

We appreciate your recognition of the 2005 Palestinian Civil Society Callfor Boycott, Divestment, and Sanctions (BDS)and its three rights-based demands as one for solidarity with the Palestinian people’s struggle for self-determination.

We further express our appreciation of your recognition that BDS is a legitimate, non-violent tool of resistance by peoples enduring settler-colonialism, occupation, and apartheid. The effectiveness of this form of struggle was demonstrated during the South African struggle for freedom, justice and equality and is now being demonstrated by the Palestinian-led BDS movement, which represents all major political and civil society forces within and beyond Palestine.

We welcome ASA’s stand as an affirmation of the decades of groundwork laid by earlier generations of Arab American scholars in the study of the impact of the US-Israeli alliance in the Middle East and the United States. For many years Arab American scholars as well as Arab scholars in the US have worked in isolation and those tackling this issue have faced a grueling combination of anti-Arab racism, Islamophobia, and various levels of censorship with little or no support from most professional organizations.

By broadening the possibility for critical discussion and debate about the US, Palestine, and Israel, the ASA’s stand has created a new opening that will help to challenge the attack on academic freedom that Palestinian and Arab-American scholars and our allies encounter in the US.

We strongly uphold the principles of free speech and association guaranteed in US jurisprudence and demand that the legal protections offered by these guarantees be extended to our colleagues in the ASA without delay.

We urge all of our colleagues of whatever ethnicity to support the ASA by:

Becoming a member of the ASA and/or making a donation to the organization,

Encouraging your department to join the ASA.

Writing a letter of support to the ASA.

Institutional affiliation for purposes of identification only.

Signed:

Rabab Abdulhadi, Associate Professor, San Francisco State University

Lila Abu-Lughod, Columbia University.

Bashir Abu-Manneh, Visiting Assistant Prof., Brown University.

Ali Abunimah.

Samer Alatout, Associate Professor.

Evelyn Alsultany, University of Michigan.

Paul Amar, University of California Santa Barbara.

Sam Bahour, Co-editor, Homeland: Oral History of Palestine and Palestinians and political pundit at ePalestine.com

Riham Barghouti, Teacher, NYC and Founding Member, Adalah-NY

Moustafa Bayoumi, Associate Professor, Brooklyn College, City University of New York.

Hatem Bazian, University of California Berkeley and American Muslims for Palestine.

On 10 December, thousands of students at the University of Michigan woke up to find mock eviction notices posted to their dormitory rooms.

The notices were a direct action carried out by Students Allied for Freedom and Equality (SAFE), aimed at presenting the truth about Israeli housing demolitions in occupied Palestine.

The goal of the action was to engage the campus community, students and faculty alike, in a discussion about our complicity in human rights abuses abroad. Our university has significant stocks invested in companies that support, facilitate and profit from the illegal Israeli occupation.

Mobilizing students

Dell supplies tens of thousands of computers to the Israeli military. General Electric supplies engines for Israel’s Apache assault helicopters used in extrajudicial assassinations of political opponents that also have led to the deaths of countless Palestinian civilians in the vicinity.

Heidelberg Cement operates a quarry in the occupied West Bank providing supplies for the construction of illegal settlements. Hewlett-Packard provides biometric monitoring for checkpoints, including several in the occupied West Bank.

In these four companies alone, our university’s shares were valued at approximately $1.7 million as of 2012.

SAFE spent months contemplating which action would best achieve our aim, and created a plan to raise ongoing awareness — and, ultimately, direct action. With the mock eviction initiative, we believe we successfully accomplished this goal, as many student leaders and administrators have reached out to us in solidarity.

In the past few years, our university has not seen Palestinian solidarity activism of this scale and nature due to a passivity in the student body. This was bred by fear of social, political and academic repercussions.

SAFE understood these concerns, and after weeks of reflection we chose to go forward with our action to reinvigorate the campus climate. We aimed to foster a dialogue that could mobilize people and challenge the preconceived notions held by some of our peers.

University or corporation?

In passing out eviction notices, we knew that we would be targeting a population of mostly new students. Our motivation was to break down the norms of institutionalized activism on campus that cater to people’s comfort — such as fliers promoting apolitical events, or weekly film screenings that are scarcely attended by those outside the student groups sponsoring them.

We have intentionally exposed students to a new way of approaching an uncomfortable situation through direct engagement and action. Education should involve people stepping out of their comfort zones.

Using the Twitter hashtag #UMMockEviction, activists and students sparked lively online discussion about the action and about Israel’s treatment of Palestinians.

Our event was part of the larger boycott, divestment and sanctions movement that is calling on the university to divest funds from companies profiting from the illegal Israeli occupation.

As students, we’ll pay nearly $100,000 or more to this university by the time we graduate. As evidenced by our public university’s investment portfolio, our tuition dollars contribute to the continual destruction of Palestinian livelihoods.

As the students of moral and social conscience in which our university prides itself, we cannot remain idle in a situation so blatant. Any profit the university earns from such investments of our tuition will have been generated from companies helping Israel violate Palestinian rights.

In March, the University of Michigan’s chief investment officer Erik Lundberg stated: “The regents have said the investments should be done based on the merit of return. We try to be blind to social factors” (“Ten things you should know about the University of Michigan’s multibillion dollar endowment,” The Ann Arbor News, 26 March 2013).

Are we attending a university, or a cold, faceless corporation?

Israeli war crimes

As a university that claims to uphold values of diversity, social responsibility and global awareness, should our investments not reflect these values?

Our intention was to educate our colleagues about how we are implicated in undermining the internationally recognized rights of Palestinians. But another aim was to demonstrate our collective power and remind the administration that we have the right to stop the university from putting profits over people.

Lundberg’s statement suggests that the university is conscious of Israeli war crimes, but chooses to ignore them. Thus, it deserves to be shamed for supporting them.

As Students Allied for Freedom and Equality, we encourage full divestment at the University of Michigan from companies complicit in the illegal Israeli occupation of Palestinian land, and from companies that profit from the violation of Palestinian rights and dignity.

Our initiative is not one that could have garnered such success without the solidarity and support of other groups and staff on campus. We hope to see the trend of coalition building and solidarity continue in our joint struggle for justice, human rights and equality in Palestine and elsewhere.

NOVANEWS

Keynes’s 1933 and 1938 Letters To Roosevelt

by ALAN NASSER

From Cambridge University in 1932-1933, John Maynard Keynes observed a promising new U.S. president presiding over what he saw as half-baked and confused policies, while labor insurgency was mounting. Roosevelt’s measures were, Keynes conceded, without precedent, but novelty was not enough. Long-term commitment to direct federal employment was required. For Keynes, this was the bottom line. (For a detailed analysis of Keynes’s prescriptions for eliminating unemployment, see Alan Nasser, “What Keynes Really Prescribed,” CounterPunch subscription edition, volume 19, number 19, 2012)

Existing programs were not only too small, but they were also either temporary (Civilian Conservation Corps and Civil Works Administration) or irrationally tied to the severely weakened states’ ability to raise substantial revenues on their own (Federal Emergency Relief Act and Public Works Administration). CWA had come closest to the kind of commitment Keynes thought indispensable, but it suffered two fatal defects: it was temporary, designed only to help workers get through the harsh winter of 1933, and of all these programs it was the object of Roosevelt’s greatest suspicion. Roosevelt feared that CWA would raise workers’ expectations of what they could permanently expect from government.

The Dawn of the New Deal and Keynes’s 1933 Letter

The president’s instincts were solidly anti-federalist; there must be no permanent direct government provision of what it is the proper function of the private sector to provide. (1) Roosevelt wanted relatively small, temporary federal efforts on behalf of workers, with the states primarily responsible for the provision of social benefits in the long run. Keynes urged large, permanent programs supplying employment during both economic contractions and expansions, provided directly by the federal government. He communicated his concern to Roosevelt in an open letter published in The New York Times on December 31, 1933. (2)

In the letter he expressed his extreme distress at Roosevelt’s timid policy. “At the moment your sympathizers in England are nervous and sometimes despondent. We wonder whether the order of different urgencies is rightly understood, whether there is a confusion of aim, and whether some of the advice you get is not crack-brained and queer.” He then outlined his alternative analysis.

The basic issue, Keynes insisted, is “Recovery,” whose object is “to increase the national output and put more men to work.” An increase in output depends on “the amount of purchasing power… which is expected to come on the market.” Recovery depends upon increasing purchasing power. There are, Keynes pointed out, three factors operating to raise purchasing power and output. The first is increased consumer spending out of current income, the second is increased investment by capitalists, and the third is that “public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money.”

Since the vast majority of consumers are workers, increased consumption expenditure is impossible on the required scale during a period of high unemployment and low wages. Business investment will eventually materialize, but only “after the tide has been turned by the expenditures of public authority.” Government investment in employment-generating public works must come first. Only after large-scale government investment can private investment be expected to kick in.

A compelling logic is implicit in that observation. According to the orthodoxy Keynes is criticizing, a revival of aggregate investment by the class of capitalists is necessary and sufficient to constitute recovery. But investment by an individual capitalist in a severe downturn would be irrational. So each capitalist will defer investment until there is evidence of recovery, i.e. evidence that the other capitalists have undertaken productive outlays. Uh-oh: a structural contradiction is in place. If each investor refrains from investment until all the others invest, no capitalist will invest. Each will die waiting for the others to come across. In the absence of an external impetus to the private investment system, the depression will be endless. Recovery is possible, then, only if a force external to the private market gets the ball rolling. Enter government to the rescue. “[T]he tide has been turned.”

Hence Keynes’s conviction that only government expenditures on a grand scale can breathe life back into a depressed economy. Keynes suggested as an example of what he had in mind “the rehabilitation of the physical condition of the railroads.” He would later, in a 1938 letter, recommend a national program of public housing as a project on the required scale.

The crisis was not merely economic. Keynes had witnessed the rise of revolutionary movements in response to the protracted inability of capitalism to meet the needs of working people. He had written about both the Bolshevik revolution and the tendency of austerity to spawn revolt from the Right. Keynes was antipathetic to both fascist and worker rule, and feared revolutionary consequences should the New Deal fail. “If you fail,” he wrote Roosevelt, “rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out.” The politicalstakes were high, as they must be under conditions of protracted capitalist austerity.

The stakes are no less high now. The current contraction emerged from a political-economic settlement, the post-Golden-Age period from 1974 to the present, resembling in relevant respects the Depression-prone economy of the 1920s.

I want to review both those features of the 1920s which generated the economic debacle Keynes addressed, and the corresponding precipitating causes of today’s crisis. The similarity of the origins of both contractions is striking. If Keynes was right to argue -and we shall see that he was- that large-scale public employment is the only remedy for a severe and extended economic contraction, it will be clear that the same prescription applies to the present depression. We will then be in a position better to grasp the urgency of public employment as a policy without which the United States faces a future of long-term stagnation and intolerable unemployment.

The 1920s as Exemplar of Mature Capitalism: the Stage-Setting for the Great Depression

The 1920s was the benchmark decade for mature pre-Keynesian capitalism. The major capital-intensive industries were in place and oligopolized (or rapidly becoming so), technological development raced ahead and production and profit levels were high. By 1919 union power had been dealt a crippling blow; labor was almost entirely unorganized during the 1920s.

The remarkable increases, between 1919 and 1929, in GDP (40 percent), production (64 percent in manufacturing), productivity (43 percent in industry as a whole, 98 percent in automobiles) and profits (200 percent) were not matched by a comparable increase in wages. Productivity advances did not lead to higher wages; wages were no higher in 1929 than they were in 1922. Nor did they bring about falling prices; industrial concentration made for “downwardly sticky” prices. The result was inexorable: national income was distributed upward so that by 1928 the nation exhibited the greatest inequality of the century to that point.

In his landmark study of the economy of the1920s (3), George Soule spelled out the consequences of that settlement:

“…toward the end of [the decade] large amounts of cash remained in the hands of of the big manufacturing and public-utility corporations that they did not distribute either in dividends or by means of new investment… the large corporations accumulated even more cash than they needed for their own uses… This money eventually spilled over into stock speculation. …[T]he surplus funds of large business corporations were now being lent directly to speculators…A curious commentary on the state of the American economy at the time is the fact thatbusiness could make less money by using its surplus funds in production than it could by lending the money to purchasers of stocks, the value of which was supposed to be determined by the profit on that production.”

The lessons of the 1920s are clear, and they bear directly on the build-up to the present crisis. Developed capitalism without social democracy and strong labor unions leads to productivity increases far outpacing wage growth, extreme inequality, insufficient working-class purchasing power, an unprecedented buildup of household debt and nowhere for profits to go but into capitalist consumption and financial speculation. With financial growth not reflecting comparable health in the productive economy, a bubble formed in stock market speculation and household debt grew faster than household income. By their nature, bubbles break. The popping of the speculative bubble brought about the stock market crash of 1929.

The crash and ensuing Depression afflicted what we have seen was a highly vulnerable economy. Because the economy had by the 1920s become industrially mature, growth no longer depended upon the breakneck expansion of the capital goods sector, but was now, and for the first time, fuelled by the production and consumption of consumer durable goods like refrigerators, radios, vacuum cleaners and, most importantly, automobiles. Consumption replaced investment as the driver of economic growth. (4) Robust growth would now require high wages.

With wages stagnant, working-class households’ ability to sustain the consumer durables boom became dependent, as it would again from the mid-1970s onward, on unsustainable household debt levels. Supplementing income-based purchasing power with credit had been a fact of life since the late nineteenth century, but the debt increments increased especially rapidly during the 1920s. The proportion of total retail sales financed by credit increased from 10 percent in 1910 to 15 percent in 1927 to 50 percent in 1929.When working-class purchasing power and household debt approached their limit by 1926-1927, the rate of growth of consumer purchases began to decline. Key growth markets like autos and construction became saturated and excess productive capacity became conspicuous. Production fell and profits were directed to financial speculation and bubble creation. The stock market and the economy responded accordingly. The Great Depression was at the door.

A comparable dynamic was in effect during the period preceding September 2008. From the mid-1970s to the year before the housing bubble began to leak, 2005, the gap between productivity growth and flat wages grew wider and wider. As in the 1920s, national income shifted steadily and increasingly to the top. Inequality approximating that of the 1920s grew. 1928 and 2007 were the highest inequality years since 1900. (Each year, not coincidentally, was followed by a major meltdown.) Workers once again resorted to debt to maintain living standards. The ratio of outstanding consumer debt to disposable income had more than doubled, from 62 percent in 1975 to 127.2 percent in 2005. Since 1995 the debt burden, measured by the percentage of household income pledged to debt service, had become increasingly concentrated in the lower three income quintiles. Financial speculation, which had accelerated since the mid-1970s, took off with a vengeance after 1999. Echoes of the 1920s were loud and clear.

When 2008 ushered in today’s depression, the political-economic legacy of the New Deal had long given way to the neoliberal religion of market-only solutions harkening back to the pre-Keynesian 1920s. The Great Depression’s lesson that only public employment on a grand scale could remedy persistent joblessness was cast aside as incompatible with born-again free market fundamentalism. Obama’s remarks at the December 3, 2009 “jobs summit” express the current elite consensus that any politically acceptable remedy for intractable joblessness must be market-based: “[While] government has a critical role in creating the conditions for economic growth, ultimately true economic recovery is only going to come from the private sector.” That’s a recipe for endless depression.

We shall see below that Big Guns from Larry Summers to Paul Krugman have finally drawn the appropriate conclusion: America faces a future of long-term, perhaps permanent, stagnation and high unemployment. This is indeed the price working people will pay for the total exclusion of public employment from current policy discussions. We can see this more clearly after we first have a look at the course of the Great Depression and the alternative Keynes urged upon Roosevelt when the New Deal recovery fizzled in 1937.

The Big Contraction, the Aborted Recovery and Keynes’s Response

From 1929 to 1933 the economy plummeted, leaving 24.9 percent of workers unemployed and many more underemployed. By 1932 more than 32,000 businesses would go bankrupt. National output fell by 50 percent. Investment plunged.20 percent of U.S. banks, at least 5,000, failed. This is what created the grist for Keynes’s mill.

The Depression reversed the euphoria of the 1920s and initiated a profound sense of desperation frequently referred to by president Roosevelt as a national “emergency.” Motivated by advisors more radical than he and mounting worker impatience, Roosevelt initiated experimental stimulus measures.

The WPA and other modest public employment measures provided sufficient momentum to the economy that a sharp upturn began in late 1933 and lasted until 1937. This was one of the two longest cyclical expansions in the nation’s history, and the steepest ever. The upturn is typically but misleadingly thought to be a direct result of the New Deal’s enormous increase in deficit spending. The lesson “Keynesians” have drawn is that mature capitalism is capable only of brief periods of stability left to its own private devices, so that government intervention during economic downturns is a recurrent necessity built into the system. Private investment, then, is necessary but insufficient to drive the accumulation process; deficit-financed government investment is also required if economic growth is to be accompanied by full employment.

This can be seriously misleading. Government investment is not merely necessary; it is the only form of investment, Keynes claimed, capable of bringing about full employment. Keynes was emphatic that reducing taxes and interest rates, and providing temporary unemployment benefits, were no substitute for direct government job creation. The lesson that matters is that the elimination of unemployment is not the direct result of government deficit spending as such. Public works projects, for example, put people to work, and this provides workers with a wage, the household spending power Keynes underscored as the key to recovery. Without restoring the purchasing power of the working majority, there would be no recovery.

Wages turned into effective demand, then, is the direct cause of a revival of production and employment. But niggardly wages will not do. The nation’s human and non-human resources are vast, and marshalling them for production at full employment calls for aggregate household spending power sufficient to that task. The 1920s and the period from 1974 to the present display those features of mature industrial capitalism which generate the kind of crisis which only high wages can reverse.

The End of the Recovery and the Triumph of Sound Finance

The recovery of 1933-1937 exhibited the fastest growth rates of the twentieth century. At the peak of the expansion industrial output and national income had returned to 1929 levels and purchases of new autos surpassed 1929 sales. (5) New auto sales were fuelled by consumer spending. The consumer demand that drove this exceptional recovery was created by public, not private, investment. It is not investment as such that capitalist development renders otiose, but private investment.

New Deal government investment was a precondition of the 1933-1937 expansion, during which banks had stopped lending and net private investment had evaporated. But the New Deal took no steps to ensure the permanence of adequate consumer demand or household income. Roosevelt took his policies to be temporary urgencies to be terminated once their “jump-start” aims had been accomplished. He anticipated the time when he could reduce deficit spending and return to the principles of sound finance.

The president’s wishes seemed to be coming true in 1937. From FY 1936 to FY 1937 total government expenditures dropped from $8,476,000,000 to $8,001,000,000 and the deficit fell from $4,361,000,000 to $2,708,000,000. Federal tax receipts increased from $4,116,000,000 to $5,294,000,000. (6)As early as January of 1937Rooseveltwas planning retrenchment. (7)

In his January 1938 budget message the president announced with relief that the increase in government income meant that New Deal deficits -meaning New Deal programs- must be reduced to 0.1 percent of GDP and taxes would be increased to fund the Social Security program. So eager was the president to bring the budget closer to balance that he could overlook the sharp declines in employment that had begun in September 1937. The president had felt forced by circumstance to accept policy to which he was otherwise opposed, direct federal employment. The improved fiscal picture provided the fiscally conservative Roosevelt with the opportunity to cut WPA jobs and other income-generating programs.

The president should invest, Keynes urged, more heavily in public works lest another disaster ensue.

Roosevelt paid no heed. New Deal spending fell and unemployment rose. The economy plunged into another, somewhat shorter and shallower, depression. The new contraction was doubly discouraging, causing public confidence in the New Deal to diminish and business to feel threatened by the radical claim that it had been shown to be unable to deliver on its promise to bring about economic renewal once government had withdrawn.

Fed chairman Marinner Eccles urged renewed government spending and Roosevelt responded by increasing WPA and AAA spending, but not by very much. His eggs were in another basket, new military expenditures. Roosevelt’s choice was not merely cynical. He saw the growing aggression of Italy, Germany and Japan in Africa, Europe and East Asia as calling for a re-evaluation of American neutrality.

Public opinion polls in 1938 and 1939 found the public disapproving of the military spending as excessive in the light of intensified economic hardship at home. The 1937 cyclical peak did not after all end the Depression. In that year workers were still pressing for what they deserved but had not yet gained. 1937 saw a massive sit-down strike at the General Motors Flint, Michigan plant. It is a measure of the public’s awareness that the recovery did not mean that the Depression was over that the strike enjoyed broad support. The Governer even called out the National Guard to protect the strikers from possible violent resistance by General Motors.

In his 1938 letter to Roosevelt Keynesurged the presidentto redouble the efforts that had produced the 1937-1938 upswing:

‘…the present recession is partly due to an “error of optimism” which led to an over-estimation of future demand… But I am quite sure that this is not all. There is a much more troublesome underlying influence. The recovery was mainly due to the following factors: -

(i) the solution of the credit and insolvency problems, and the establishment of easy short-term money;

(ii) the creation of an adequate system of relief for the unemployed;

(iii) public works and other investments aided by Government funds or guarantees;

(iv) investment in the instrumental goods required to supply the increased demand for consumption goods;

(v) the momentum of the recovery [was] thus initiated.’

Keynes intends here to rule out the position common among the administration’s apologists, that current policy is unobjectionable and not at the root of the renewed contraction. The problem, it was argued, was that the president had made an overoptimistic projection of future buying power. The remedy was to resume government spending as before. Keynes objected that the problem rested with current policy, which not only must not be retrenched, as Roosevelt had done, but should be expanded. More of the same was not enough. The key movers of the expansion had been (iii) and (iv), but they were not large enough:

“Now of these (i) was a prior condition of recovery, since it is no use creating a demand for credit, if there is no supply. But an increased supply will not by itself generate an adequate demand. The influence of (ii) evaporates as employment improves, so that there is a dead point beyond which this factor cannot carry the economic system. Recourse to (iii) has been greatly curtailed in the past year. (iv) and (v) are functions of the forward movement and cease – indeed (v) is reversed – as soon as the position fails to improve further. The benefit from the momentum of the recovery as such is at the same time the most important and the most dangerous factor in the upward movement. It requires for its continuance, not merely the maintenance of recovery, but alwaysfurther recovery. Thus it always flatters the early stages and steps from under just when support is most needed. It was largely, I think, a failure to allow for this which caused the “error of optimism” last year.” (Emphasis Keynes’s)

Keynes makes it clear that increased spending on public works is the linchpin of sustained recovery. If spending is not increased, much less actually decreased, as Roosevelt had done, the economy’s “forward movement” will reverse itself. Thus, forward movement must also be “upward movement,” creating a higher level of demand, not merely restoring the pre-downturn 1937 level. Output and income must increase over time. This means that public investment too must increase.

Failure to grasp that consumption demand and investment demand must perpetually increase in tandem will lead one erroneously to “over-optimism,” to infer from the achievement of a higher level of demand that one need only do more of the same, with respect to government investment, in order to maintain demand. But the nature of capitalism is that demand requires not merely to be maintained, but to be increased, and that requires increased investment. The upshot is that government must be permanently involved in support of effective demand, and since the precondition of demand is the availability of jobs, the government must become a permanent provider of employment.

In the letter Keynes recommends “increased investment in durable goods such as housing, public utilities and transport… in the United States at the present time the opportunities, indeed the necessity, for such developments were unexampled.” Keynes had understood from earlier discussions with Roosevelt and his advisors that the administration was commited to the need for hitherto untried alternatives, and that housing was an obvious priority.

But in this case it was Keynes who had been over-optimistic. “Take housing. When I was with you three and a half years ago the necessity for effective new measures was evident. I remember vividly my conversations with Riefler at that time. But what happened? Next to nothing.”

Keynes went on to make the case for investment in public housing as an ideal for a more buoyant and sustained recovery:

“Housing is by far the best aid to recovery because of the large and continuing scale of potential demand; because of the wide geographical distribution of this demand; and because the sources of its finance are largely independent of the Stock Exchanges. I should advise putting most of your eggs in this basket, caringabout this more than about anything, and making absolutely sure that they are being hatched without delay.” (Emphasis Keynes’s)

Roosevelt apparently did not “care” enough to launch such a program. To this day the U.S. has one of the poorest records on public housing of all the developed capitalist countries.

Keynes was familiar with the American bias toward the individual states, rather than the federal government, as providers economic aid. If the states must be intermediaries of federal funding, so be it, he concedes – but get the job done! “In this country we partly depended for many years on direct subsidies. There are few more proper objects for such than working class houses. If a direct subsidy is required to get a move on (we gave our subsidies through the local authorities), it should be given without delay or hesitation.” (Emphasis Keynes’s)

Keynes implored Roosevelt to nationalize the utilities. “Personally I think there is a great deal to be said for the ownership of all the utilities by publicly owned boards… If I was in your place, I should buy out the utilities at fair prices in every district where the situation was ripe for doing so, and announce that the ultimate ideal was to make this policy nation-wide… a policy of competing plants with losses all round is a ramshackle notion.” As for the railroads, “Nationalize them if the time is ripe.” And the imperative to socialize was not limited to railroads and utilities. “I accept the view that durable investment must come increasingly under state direction… I regard the growth of collective bargaining as essential. I approve minimum wage and hours regulation.”

Note Keynes’s institutional socialism: “durable investment must come increasingly under state direction.” The socialization of investment was no mere “emergency” measure.

Summing up his policy recommendations, Keynes declares that “A convincing policy, whatever its details may be, for promoting large-scale [government] investment under the above heads is an urgent necessity… Far too much precious time has passed.” There will be resistance, Keynes acknowledges, to these measures. Capital will greet all these recommendations with great alarm. Keynes’s instructions to Roosevelt on the proper handling of businessmen is wonderfully clever, close to Oscar Wilde at his best:

“Business men have a different set of delusions from politicians; and need, therefore, different handling… You could do anything you liked with them, if you would treat them (even the big ones), not as wolves and tigers, but as domestic animals by nature, even though they have been badly brought up and not trained as you would wish. It is a mistake to think that they are more immoral than politicians. If you work them into the surly, obstinate, terrified mood, of which domestic animals, wrongly handled, are so capable, the nation’s burdens will not get carried to market…”

This was the way to break down resistance and enlist capital into the recovery effort.

The notion that capital can be cajoled to acquiesce in the socialization of some of the nation’s biggest private investments strikes us as naïve. In Keynes’s day capital had nothing resembling the virtually complete hegemony over public policy that finance capital enjoys today. But about this Keynes was right: capitalists are not more immoral than politicians. The need to enlarge profits under conditions of international competition does not permit moral restraint, any more than those sitting around a Monopoly board are morally bound to throw the game out of empathy with the losers. The rules and objects of the game are such that moral considerations have no application.

Not so with politicians, who are supposed to legislate in the interests of the democratic aspirations of the citizenry. Protecting the less advantaged from the vagaries of the market is a moral and political imperative. This is why picketing the banks, as some did after the September 2008 debacle, betrays a failure to grasp the source of economic power. In themselves, the banks are powerless. Such powers as they have are legislated, all of them. What banks do they do, Capital (sic) Hill willing and enabling. Political economy is first political; the economics is derivative.

Roosevelt could not have been expected to embrace Keynes’s counsel. The resumed spending, niggardly as it was, brought about a minor rebound, but the overall contraction was not ended until the U.S. mobilized for entry into the Second World War.

Since last November, perhaps the most widely discussed item of economic news has been Larry Summers’s Nov. 8 speech at the IMF’s Annual Research Conference. Summers argued that it is likely that the US faces a future of chronic “secular stagnation,” with slow growth, high un- and underemployment and low wages. The force of ‘secular’ is that this is not a temporary state; stagnation looks to be the “new normal.”

After the postwar boom began the term ‘secular stagnation’ fell out of use as the 1920s fantasy of endless growth and prosperity once again took hold. But two post-Golden-Age factors have made it increasingly difficult for mainstream economists to sustain optimism. The slow growth rates since 1974, and especially the ineffectiveness of the Fed’s recent unparalleled monetary stimulus, defies orthodox comprehension. More importantly, we are seeing both the mass destruction of full-time jobs, many of which will never return, and record levels of long-term unemployment (unemployed for 15 weeks or longer).

Most revealing is that long-term unemployment has been rising since the late 1960s, well before the triumph of neoliberalism. The short-term unemployed have been a shrinking percentage of all unemployed throughout the entire postwar period. Looking at the business cycle over the last forty years, an ominous trend emerges: in each business-cyclical expansion, the long-term unemployment rate remains either at or above the level of the previous expansion. In a word, for the last forty years the short-term unemployed have been a declining, and the long-term unemployed an increasing, percentage of all unemployed. By Keynes’s own standards, pretend-Keynesian fiscal policy has been a seventy-year bust.
Summers’s forecast shows that this has not been entirely lost on the economics establishment.

Summers’s invocation of secular stagnation takes off from the fact that while thedot.com bubble of the late 1990s did (for three years only) raise employment and wages, the much larger housing bubble of the 2000s had no such effect. It neither produced high employment nor drove up wages nor spurred the economy to full capacity. He adds the equally important observation that neither of these bubbles, representing a huge boost to demand, brought about real-economy inflation, a typical concomitant of robust, employment-creating growth. Krugman adds (New York Times, blog, November 16, 2012) that even earlier expansions, such as characterized the later Reagan years, were driven not by economic “fundamentals” like rising employment and wages, but by “runaway thrift institutions and a large bubble in commercial real estate.” As Summers put it, “Even a great bubble wasn’t enough to produce any excess of aggregate demand… Even with artificial stimulus to demand, coming from all this financial imprudence, you [didn’t] see any excess… I wonder if a set of older ideas, that went under the phrase ‘secular stagnation’… may not be without relevance to America’s experience.”

The conclusion drawn by both Summers and Krugman is that bubbles appear to be required to sustain not merely the listless growth of the post-Golden-Age era, but even the exceptionally sluggish growth rates of the new millenium. So powerful is the tendency to stagnation that even zero interest rates are insufficient to create jobs -much less full employment- or to get the economy running at full capacity. In sum, full-throttle monetary stimulus functioning to sustain bubbles is necessary to keep the economy from falling below stagnation levels of output and rates on unemployment. Bluntly put, if you don’t want a full-fledged Depression, you’ve got to keep the bubble going. Slow growth, high un- and underemployment and low wages are the best we can do.

Expect no relief, says Summers: “The underlying problem may be there forever.” Krugman puts it in the form of a rhetorical question: “[W]hat if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?” (“A Permanent Slump?”, New York Times, November 17, 2013) To his credit, Krugman saw the handwriting on the wall well before the Summers speech. In his June 27, 2010 column, he wrote: “We are now, I fear, in the early stages of a third depression…[T]he cost – to the world economy and, above all, to the milliions of lives blighted by the absence of jobs – will… be immense.”

In none of this discussion is there mention of the Keynesian solution, government as a permanent and increasingly essential provider of productive employment. Ironically, Summers and Krugman have unwittingly made the case that orthodox, acceptable demand boosters are inadequate to the task of providing working people with material security. Large-scale public employment is, as Keynes argued, the only alternative to mass immiseration.

The Summers-Krugman point confirms Keynes’s central claim that, contrary to the neoclassical theory that the free economy naturally tends toward full-employment equilibrium, the economy can reach equilibrium (the quantity of goods supplied is equal to the quantity of goods demanded) at any level of employment. Let there be 30 percent unemployment. Firms will then produce no more and no less than the lucky 70 percent are willing to pay for. Excess capacity will be wrung out of the system by the liquidation or destruction of redundant plant and equipment. But what about excess labor capacity?

Secular stagnation leaves the nation with a large number of permanently un- and unemployed persons devoid of hope for themselves or their children. But it is just this hope that constitutes the “American dream.” With the dream become a nightmare, we are on the path to social dislocation on a potentially terrifying scale: higher rates of crime, suicide, domestic violence, psychological depression and other forms of social disorder characteristic of periods of intense material insecurity. These are forms of unorganized resistance, and cannot be “wrung out” of the system like idle plants. They will be repressed. The powers that be have been putting in place for some years now, surely in anticipation of widespread social turbulence, the infrastructure of a police state. This comes as no surprise. Historically, capitalism in deep and protracted crisis and without an organized and active Left generates the makings of fascism. If the Left remains dormant, we are in for big trouble.

Alan Nasseris professor emeritus of Political Economy and Philosophy at The Evergreen State College. His website is:http://www.alannasser.org. His book, The New Normal: Persistent Austerity, Declining Democracy and the Privatization of the State will be published by Pluto Press later this year. If you would like to be notified when the book is released, please send a request to nassera@evergreen.edu

(4) On the shift from investment to consumption as the principal driver of capitalist growth, see Alan Nasser, “The Economics of Over-Ripe Capitalism,” CounterPunch, May 3-5, 2013. For the most thorough development of this point see James Livingston, Against Thrift (New York: Basic Books, 2011)

NOVANEWS

Transfer Pricing Helps Tech Companies Shield Their Profits

by DARWIN BOND-GRAHAM

Yesterday San Francisco’s politicians announced that Google, Apple, and other Silicon Valley companies will be charged for the use of the city’s bus stops. Until yesterday the private buses, untold numbers of them, enter the city each morning to pick up thousands workers headed for corporate campuses in San Mateo and Santa Clara counties to the south. Each evening they return to drop employees off, and while they clog city streets and impede the movement of the city’s public buses, the companies haven’t been made to pay a dime for using taxpayer infrastructure.

Private tech company buses are arguably the most conspicuous symbol of inequality and displacement that is tearing California’s Bay Area apart. The hyper-mobility they provide for tech company employees translates into rising rents in the Bay Area’s urban cores of San Francisco and Oakland and displaces those whose incomes aren’t keeping pace with real estate prices. The tech company buses are also a lesson in how many Silicon Valley giants have become incredibly valuable. The biggest tech companies thrive off taxpayer supports, be they bus stops, public universities, or telecommunications infrastructure. At the same time they aggressively avoid taxes themselves. They’re the archetype of the free rider, the shameless citizen who takes from the collective to amass private wealth and doesn’t give back to community without a fight.

Google, for example, will now pay San Francisco about $100,000 a year to run its buses into into the city, according to the Metropolitan Transportation Agency’s director Ed Reiskin. Google, however, is one of the most aggressive tax avoiders. $100,000 is insignificant to Google’s bottom line. It’s 0.000002 percent of Google’s 2012 revenue. It’s one one-hundredth of one percent of Google CEO Eric Schmidt’s 2011 compensation. It’s hardly a rounding error in the company’s quarterly accounting reports.

The statutory U.S. corporate income tax rate is 35%, meaning that a corporation should be expected to pay 35 cents of every dollar in earnings to the feds. Depending on who you ask, Google pays much less than this, mainly by employing a strategy known as transfer pricing.

Through transfer pricing Google assigns ownership of valuable intellectual property to foreign subsidiaries, and claims that certain economic activities take place in a specific jurisdiction that are outside of the Internal Revenue Service’s reach, and inside a low tax jurisdiction. This jurisdiction is Ireland, where many of the tech companies have established offices in order to take advantage of virtually non-existent tax rates. Google and its tech industry peers state ritualistically in their securities filings that all revenues assigned to these low-tax, offshore jurisdictions will be indefinitely reinvested abroad. Here’s what Google actually wrote in their 2012 annual report:

“As of December 31, 2012, $31.4 billion of the $48.1 billion of cash, cash equivalents, and marketable securities was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., we would be required to accrue and pay U.S. taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.”

According to a Thompson-Reuters report from last year, Google’s 2012 effective tax rate on overseas earnings was 2.6% on 5.8 billion in profits. That’s more cash for the pile of offshore ocean money. Microsoft paid a rate of approximately 9.4% on a much larger $20.6 billion in profits. Apple dodged and weaved the best, paying a mere 1.9% on 36.8 billion.

So what’s wrong with setting up shop in the lowest tax jurisdiction? If it’s legal we can hardly blame the tech companies, right?

The problem is that transfer pricing is an illusion that is dishonest about what makes these companies valuable, and how they generate these profits. The value of these companies’ brands, their technologies, their most productive workforces, and the physical and regulatory infrastructure they use to build their markets exists in the United States, and in other nation’s with higher tax rates. These high tax rates support these complex institutions that create value. What the tech companies are doing, in essence, is using the public sector’s store of goods to obtain valuable services—from eduction for skilled labor, to transportation infrastructure, to federally funded research for new product ideas and fields—but they’re not paying back into the tills that support these goods.

In Google’s case there are clear examples of this one way flow of value. Google Maps is an amazingly useful product that brings a lot of traffic through Google’s servers, helping the company cache valuable data related to user queries, user-created maps, and to place millions of ads. Google, however, didn’t invent these maps from scratch. Instead, beginning in the 1980s, long before Google existed, the federal government funded an effort to gather and organize a huge trove of geographic data through the US Census Bureau. That project evolved into TIGER, the Census Bureau’s mapping project, and eventually Google, Microsoft, Apple and other tech companies came along and asked for the raw data. The Census Bureau handed it over at virtually no cost.

“I’m not aware of any pressure to try to recoup the cost,” Michael Ratcliff of the US Census Bureau told me last year in an interview. “Everybody realizes there’s been an enormous benefit to companies that use it. The American public has already paid for it. This is public data.” The Census gave it away to Google and other tech companies just as it would give the product away to anyone who wanted to use it.

Google has now made enormous money from its maps product, even though the heaviest lifting on this technology was done by federal employees using federal funds. Google certainly added value to the maps with new features, and by making the tool accessible. The company’s aggressive tax avoidance means, however, that a share of this value isn’t being returned to one of the major sources of its creation: the federal government. Therefore the burden to fund programs like the Census Bureau’s geography program is shifted onto those who aren’t poised to game the tax code with offshore strategies.

This is basically the tech sector’s model today. It’s why protesters have been blocking Google and Apple buses in San Francisco and demanding that the companies be made to pay back into the budgets of the cities and states that they’re siphoning value from.

NOVANEWS

Nothing to Celebrate

by NICK ALEXANDROV

This has already been a rotten year for Washington state’s Boeing workers, who “agreed to concede some benefits in order to secure assembly of the new 777X airplane for the Puget Sound region,” an Associated Press article claimed on January 4. Jim Levitt, a 35-year Machinist at Boeing, gave a shop-floor view of this “agreement,” explaining in a New Year’s Eve piece for Labor Notes that the deal was “rammed down our throats with a calculated voter suppression effort,” the vote slated by the International Association of Machinists & Aerospace Workers for “a day when many, possibly thousands, of our members will not be present.” “Besides losing the defined-benefit pension,” Levitt stated in a follow-up piece, “we’ve lost collective bargaining, for all intents and purposes,” with Boeing’s “new modus operandi” being “Take It or We Leave.” This threat is serious, revealed by the company’s diligent efforts to help eviscerate U.S. labor in recent years. “From 2001 to 2004,” historian Norman Caulfield writes, “Boeing cut more than 35,000 employees from its U.S. workforce,” part of some 3 million domestic manufacturing positions eliminated around the same time.

NAFTA, the so-called “free trade agreement” between Canada, Mexico, and the U.S. that turned 20 on January 1, secured rights for investors, and has helped spur this devastation of U.S. manufacturing. It was a bipartisan triumph, Jeff Faux reminds us, “conceived by Ronald Reagan, negotiated by George Bush I, and pushed through the US Congress by Bill Clinton in alliance with Congressional Republicans and corporate lobbyists.” And one of its accomplishments has been “accelerating the offshoring of jobs in the aircraft and aerospace industries,” Caulfield explains, noting that, in 2005-2006, “Cessna Aircraft, Bombardier Aerospace, and Raytheon Aircraft announced plans to move wire harness production from Wichita, Kansas, to various locations in Mexico.” Depicting these developments as “failures,” a common criticism, misses the point, since NAFTA’s supporters shaped it to serve their interests. Activists Kevin Danaher and Jason Mark list “Boeing, General Electric, Motorola, Caterpillar, and IBM, among others” as some of its chief backers—a group, in other words, that most definitely “did not include labor unions, public interest organizations, or small business associations,” sociologists Patricia Fernández-Kelly and Douglas S. Massey observe.

Critics warned immediately that the arrangement would ruin the lives of those excluded from the planning stages. Faux, in 1993, emphasized “the certainty that NAFTA will cause economic and environmental loss to a significant number of Americans,” while Sheldon Friedman, almost a year earlier, concluded that “[t]he victims of NAFTA will be many of the same workers who have already been devastated over the last decade or more by plant closings, permanent layoffs, and real earnings declines.” Furthermore, NAFTA’s proponents were well-aware of its predictable outcomes, having produced scant evidence to counter the grim forecasts. The U.S. International Trade Commission, for example, “found that the highest estimate of a potential NAFTA contribution to employment in the United States was” an impressive “eight one-hundredths of one percent,” Faux pointed out. And the “Hufbauer-Schott study, regarded as the definitive case for NAFTA,” omitted from its final version a table, appearing in a draft, “that showed a job loss over the long term from NAFTA.”

Since both advocates and opponents knew what the arrangement entailed, there was little possibility of its consequences being seriously debated. Paul Krugman, a great fan of the initiative, complained in 1993 about how “hopeless” it was “to try to argue with many of NAFTA’s opponents,” none of whom were able to grasp the obvious—namely, that “NAFTA will have no effect on the number of jobs in the United States,” the future Nobel Laureate proclaimed with a straight face. But NAFTA prevailed not because of its champions’ intellectual finesse, “but because of a mammoth lobbyprop conducted by corporate ‘big hitters’—including Federated Department Stores, Amana, Whirlpool, G.E., Westinghouse, Caterpillar, CitiBank, Fruit of the Loom, and Boeing—that insisted in media adprop campaigns that NAFTA was the key to prosperity,” communications theorist Alex Edelstein clarified.

These campaigns diverted attention from the fact that NAFTA was the key to labor’s misery, as intended. Dean Baker wrote recently that NAFTA was “designed to push down the wages of manufacturing workers by making it as easy as possible to set up operations overseas,” and it has contributed, the Economic Policy Institute’s Robert E. Scott explained, to growing “trade deficits with Mexico,” which “had eliminated 682,900 good U.S. jobs” by 2010, “most (60.8 percent) in manufacturing.” The term “trade,” as used in these contexts, takes on a bizarre meaning, bearing little resemblance to the phenomenon international trade theory purportedly describes. Peter Dicken notes that a significant portion of global “trade” today occurs “within the boundaries of the firm—although across national boundaries—as transactions between different parts of the same firm.” It’s believed that roughly a third of global trade is intra-firm, though Dicken admits “that is probably an underestimate.”

The U.S.-Mexico border, no barrier to the corporations that pushed for NAFTA, has become increasingly militarized over the past two decades, to the point where only the most hostile desert stretches remain free of Border Patrol swarms—a “physical layout” that “promotes the death of migrants,” in investigative journalist Óscar Martínez’s grim assessment. These migrants try to escape a country where huge swathes of the terrain have been transformed from lands serving subsistence needs into potential profit sources, shattering poor farming communities in the process. David Bacon, quoting business columnist Carlos Fernández-Vega, notes that, from 2000-2012, “about 26 percent of the national territory was given to mining consortiums for their sole benefit.” These transfers were concurrent with wipe-outs of both tariffs on agricultural goods entering the country, and subsidies for Mexican farmers—“a death sentence” for these people, Ronald Mize and Alicia Swords conclude, and Laura Carlsen points out that one-quarter of all Mexicans now lack access to basic food, while malnutrition plagues one-fifth of Mexico’s children.

Reviewing a similar catastrophe, the Irish nationalist John F. Scanlan argued in 1880 “that free trade is by far a more formidable agent than war in the subjugation of a nation.” Scanlan was referring to the British-Irish Acts of Union (1800-1801), “designed for British and imperial purposes,” in historian Alvin Jackson’s evaluation, and which created a “free trade area” between the two kingdoms. An earlier historian and economist, Henry Charles Carey, discussed in an 1872 book the impressions of one “English traveler” surveying the wreckage of “the free-trade provisions of the Act of Union” throughout Ireland in 1834; in Kilkenny, the wanderer recounted, rather than “finding men occupied, I saw them in scores, like specters, walking about,” while in Callan, “containing between four and five thousand inhabitants, at least one thousand are without regular employment,” with “six or seven hundred entirely destitute.” The similarities between past and present are obvious, and should be borne in mind, Faux writes, as U.S. officials shed “crocodile tears over jobs and inequality”—while Obama demands the authority to force through arrangements like the Trans-Pacific Partnership, described as “NAFTA on steroids.”

NOVANEWS

Moving Toward a Just and Equitable Economy

by ALICE O’CONNOR

Fifty years after Lyndon B. Johnson made it the centerpiece of his first State of the Union address on January 8, 1964, the War on Poverty remains one of the most embattled—and least understood—of Great Society initiatives. It’s an anniversary worth celebrating, despite historical memory distorted by decades of partisan attack, both for the commitments and priorities it reflected, and for the insights it offers into the political challenges of fighting inequality today.

The War on Poverty was still very much in the planning stages when LBJ made his historic pledge, though its broadest outlines were sketched out in the speech and in the 1964 Council of Economic Advisers Report: a fast-growing, full employment economy; an all-out “assault” on discrimination; investments in education, job training, and health care; and locally organized programs of community action, planned with what would only later be added as a legislative mandate for “maximum feasible participation” of the poor. Opportunity was the initiative’s keyword, enshrined in the enabling legislation, and the newly-created agency, the Office of Economic Opportunity, that became its administrative home.

Contrary to conservative detractors, the War on Poverty did not create “special privileges” for the poor. Still less was it a vast expansion of “dependency”-inducing cash relief, relying far more on preventative health, nutrition, and old-age related expenditures to shore up the federal safety net and on signature programs such as Head Start, Job Corps, and community-based housing and economic development to create opportunities for advance. More controversially, community action programs encouraged poor people to organize for basic rights that better-off Americans had come to expect as citizens of the world’s most affluent democracy and beneficiaries of the New Deal welfare state: to decent job and educational opportunities, fair labor standards, protections against economic insecurity, legal representation, and access to political participation, starting with the right to vote. For this the.

War on Poverty earned the enmity of a wide array of politically-entrenched constituencies, from the Jim Crow South to the big-city liberal North and West. It also drew the ire of many erstwhile supporters, including LBJ himself, who put pressure on OEO administrators to keep a lid on spending and to rein community action in even as he escalated spending on fighting communism in Vietnam.

LBJ’s policies did not end poverty—a fact conservatives, having long since argued that government had no business fighting in the first place, have recently twisted into a narrative of failure used to justify further cuts in the social safety net. But that shouldn’t keep progressives from drawing lessons from its shortcomings as well as its accomplishments in building a campaign against inequality.

One is the importance of fighting the battle at the level of economic policy and structural reform rather than relying on redistributive social welfare policies alone. LBJ’s economists recognized this in their push to move beyond budget-balancing orthodoxy to reduce unemployment (then at 5.5%) to more acceptable (3-4%) full employment targets. But they held back by relying on growth-stimulating tax cuts while downplaying the need for strategies to generate jobs in the nation’s deindustrializing urban and rural communities. A second is that the problem of poverty cannot be resolved without addressing thedeeper inequities of race, class, gender, geography, and power—a lesson overshadowed by the myth ofa “culture of poverty” that gripped policy elites in the 1960s and continues to thread through popular and academic discourse to this day.

Third is that some of the fiercest battles of the War on Poverty were fought locally, as they continue to be today. This brings us back to the militant politics of massive resistance, which—then as now—played out in struggles over who would control the implementation of anti-poverty policies and resources and, financial incentives notwithstanding, whether they would be implemented at all. But it also calls up the progressive organizing unleashed by community action, which continues to sustain the legacy of the grassroots War on Poverty in community-based movements for living wages, immigrant rights, and the right to health care today.

And fourth is the need to dethrone the narrative of failure, in ways that go beyond the War on Poverty’s penchant for “maximum feasible public relations” and statistical cost/benefit analysis to recognize not just the capacity, but the political and moral imperative of committing the resources of democratic government to achieving a just and equitable economy.